It’s Social Media Week around the world, and in East Asia, Hong Kong is host to many new developers in the region. In Hong Kong, startups are now sexy again after recovering from the bursting of the Internet bubble in 2000. While Hong Kong is not representative of the region, with China, South Korea, Japan, Malaysia and Indonesia all as major markets each with their own differences, it does provide a very interesting neutral ground where many developers have come to congregate.
In order to cope with its new status, some developer/entrepreneurs in Hong Kong have self-organised to establish their own workplace, boot.hk, where they can work and network. This has been a success, drawing developers from as far away as the U.K., France and the U.S. to Hong Kong. Frequently, the projects are not for products to launch in Hong Kong, but in other markets of Asia, including Singapore, Indonesia and China.
Compared to the U.S., Asia has been faster at moving to mobile. In Hong Kong, the favoured platform is the iPhone, and the iPad is rapidly replacing the notebook for many uses. While Android is sure to make major gains this year, the Apple platforms have taken the top of the market, putting them in the same brand space as BMW for automobiles. In status-conscious Asia, where first impressions are so important, many consumers prefer to save enough to buy the best, rather than settle for second best. In China, many users prefer to wait 1-2 months to get an iPhone 4 rather than buy an Android phone, even though they are cheaper and more readily available.
When it comes to applications, Asia’s high population density and urbanization makes for different use cases than the US, which has much wider spaces and less public transport. The new generation of iPhone apps are developed to address these special Asian needs; one new app under development by TaxiZu (now in closed beta) helps riders find shared taxi rides in real-time, helping passengers to lower travel costs. Since Asians are rapidly switching to reading their graphic novels on their smartphones, Crispy Entertainment is publishing their line of comic books, Super Kaiju Hero Force, as an app in the Apple AppStore. These are just some of the examples.
In spite of this, some bottlenecks remain:
- There is a scarcity of angels in Asia who come from tech backgrounds, and understand the entrepreneur process from the ground up. Most angels come from the west, where the market is increasingly different from the Asian experience, and who lack knowledge, and more importantly, connections in the local markets. The rare exceptions are Joichi Ito, founder of Singapore-based Neoteny Labs and Batara Eto, founder of Japan’s highly successful mobile social network, Mixi.jp and who now has his own fund, East Ventures, which is mainly focused on Indonesia.
- While there are many wealthy in Hong Kong, virtually all of Hong Kong’s tycoons made their money in manufacturing or real estate. Lacking experience in hi-tech, they don’t have the confidence to commit money, even though the deal amounts are small compared to what they are used to investing.
- Many who call themselves angels are, in fact, lawyers or bankers. While they know how to structure deals and investments, they don’t know how to acquire users, build products and markets or scale technology, which is what early investors need.
- Exit amounts for investments are small, except for China. To give an example, Koprol, which is largely like Foursquare, was acquired by Yahoo in May, 2010 for only US$30M.
Because of this, many are still forced to seek funding in the US, even though most US angels and VCs have little to no understanding of the Asian markets and offer virtually no local connections. This lack of ready capital in the early phase has hampered the development of the market. Nevertheless, smart US companies such as Facebook know the importance of the Asian audience and demographics, quietly placing special emphasis on Asia (outside China, where it is blocked) by marketing Facebook Credits to Asian online game developers. For Apple, China is on track to become their second largest market, only behind the US.
Looking into the future, Asia holds great promise in the area of big data. While leading Chinese companies such as Tencent, Alibaba, Baidu and Sina have not been willing to share user data with other companies, mainly because the number of Internet users in China continues to grow at 22% annually, Google and Amazon have continued to expand their data centre presence in Asia. So far, there are not any early stage VCs like New York-based IA Ventures which invest in big data and data mining for Asia.
Of the world’s top 20 megacities with populations over 10 million, 12 are in Asia and only two are in the US (New York and Los Angeles) . These populations are highly mobile and will be accessing their data, mostly from their iPhone, Android phones and tablets, which will be connected on the backend to some kind of analytics platform for data mining. With numbers like these, it’s easy to see that while the market has been slower to take off, it will rapidly overtake the US when it does finally get traction.
The future is there for us to see. The only question now is how and when we get there.